Ventas, Inc. Q3 FY2025 earnings call

• Ventas is executing on its 1-2-3 strategy based on the megatrend of longevity, with SHOP NOI expected to grow double-digit for the fourth year in 2025 and $2.5 billion of private pay U.S. senior housing investments anticipated to close during the year.
• SHOP once again powered results, with broad-based demand and excellent RevPOR and revenue strength. The U.S. communities led the way with strong Same-Store Cash NOI and occupancy growth.
• Ventas has increased its full-year guidance, expecting 9% year-over-year growth in normalized FFO per share and 7.5% total company Same-Store Cash NOI at the midpoint.
• The company has closed $2.2 billion of senior housing acquisitions year-to-date and increased 2025 investment guidance to $2.5 billion.
• The previously announced transactions relating to 121 Triple-Net lease senior housing communities are well underway, with 27 of 45 communities converted to SHOP by year-end, and significant occupancy and NOI upside expected.
• The research portfolio is relatively insulated from current market challenges with about 3/4 of base rents from creditworthy institutional leaders and a weighted average lease term of over 9 years.

Ventas' SHOP Same-Store portfolio delivered 16% NOI growth year-over-year in the quarter, with the U.S. leading at 19% growth. Margin grew 200 basis points to 28% driven by over 50% incremental margin. Revenue grew 8% due to strength in both occupancy and pricing. The research portfolio generates 8% of the enterprise NOI. In the third quarter, research Same-Store Cash NOI was $400,000 lower year-over-year driven by lower rents on certain innovation flex space tenants. The U.S. communities had 19% Same-Store Cash NOI growth and 340 basis points of occupancy growth.

• Normalized FFO per share is expected to grow 9% year-over-year at the midpoint of improved guidance.
• Total company Same-Store Cash NOI growth is raised to 7.5% year-over-year.
• SHOP Same-Store NOI midpoint improves by 100 basis points to 15%.
• 2025 investment guidance for private pay U.S. senior housing is $2.5 billion.

• The research portfolio, while relatively insulated, still faces some exposure to market challenges.
• Uncertainties exist in the successful execution of Triple-Net to SHOP conversions, although progress is being made.

Q: Jonathan Hughes asked about underwriting criteria and lowering initial yield requirements.

A: Debra Cafaro and J. Hutchens responded that they are ambitious in growing the senior housing business, with volume accelerating and targeting low to mid-teens unlevered IRRs.

Q: Michael Carroll inquired about Brookdale SHOP transitions and revenue-generating CapEx.

A: J. Hutchens explained about the high-touch approach, routine refreshes, and larger projects like the Hallmark in Chicago, with most projects being routine and designed for minimal disruption.

Q: Farrell Granath asked about occupancy in Canada and expanding into the U.K.

A: J. Hutchens said Canada has high occupancy but less organic NOI growth opportunity, and Ventas has set up a SHOP platform in the U.K. with CCG but focuses on the U.S. for now.

Q: Vikram Malhotra asked about portfolio diversification and Canada investment monetization.

A: Debra Cafaro said they are focused on growing the private pay SHOP business and evaluating portfolio actions, while J. Hutchens mentioned Canada has good results but no plans to monetize majorly.

Q: Michael Goldsmith asked about SHOP RevPOR growth and operator assessment.

A: J. Hutchens discussed strong pricing and balance of occupancy and price, and about looking for operators with good track records and buying below replacement costs.

Q: Richard Anderson asked about debt disruption and sequential occupancy growth.

A: J. Hutchens said they stuck to occupancy guidance, with strong move-ins and moderated move-outs driving growth.

Q: Samuel Ademola Ohiomah asked about 27 converted assets from Triple-Net to SHOP.

A: J. Hutchens said 27 have transitioned, with smooth transitions and enthusiasm from operators.

Q: Juan Sanabria asked about independent living pool performance.

A: J. Hutchens said independent living in the U.S. has strong growth, impacting RevPOR mix but being a high-class problem.

Q: William John Kilichowski asked about Canadian portfolio and acquisition pipeline risks.

A: J. Hutchens explained Canada's growth vs U.S., and no near-term risks limiting acquisition cadence.

Q: Ronald Kamdem asked about operator use of data and private equity in the space.

A: J. Hutchens discussed the use of tech in operators' communities and the barrier to entry for some private equity, with private equity already in the space but platform design creating advantages.

Q: Michael Stroyeck asked about Triple-Net to SHOP transition potential.

A: J. Hutchens said most transition plan executed, with some smaller portfolios left and NOI upside expected.

Q: Michael Mueller asked about performance between AL, memory care, and IL.

A: Debra Cafaro said both AL and IL will benefit from broad-based demand as the 80-plus population surges.